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No U.S. Recovery Help From Abroad

Jan 13, 2005

ByJohn S. McClenahen As the U.S. economy tentatively moves toward recovery from a nine-month slowdown, it will not be getting any help from Europe, Asia, or Latin America. For example, the 12 so-called Euroland economies, the dozen nations that have adopted the euro as their common currency, will post only about 2% inflation-adjusted growth this year, figures DRI-WEFA, Lexington, Mass. Germany, once Europe's economic locomotive and still a major exporter of capital goods, is expected to eke out 1% growth this year. Europe's industrial production numbers reveal a dramatic slowdown in output. This past January, Merrill Lynch & Co., New York, anticipated a 3.3% year-to-year increase in output for the euro-using nations and a 3.1% rise for the larger, 15-nation European Union (EU). Now, Merrill Lynch expects Euroland to show a 1.6% industrial-production increase in 2001, with the EU managing just 0.6%. In Germany, Merrill Lynch now expects industrial production to contract 0.2% this year, nearly four percentage points lower than the 3.5% expansion it forecast in January. In Asia, DRI-WEFA expects Japan to post a 0.5% decline in GDP this year, followed by a "weak" recovery in 2002. Elsewhere in Asia, Singapore is already in recession and Taiwan could soon follow, believe DRI-WEFA's forecasters. "Most Asian economies are being hit by the triple whammy of collapsing U.S. high-tech imports, a weaker yen (many Asian companies compete with their Japanese counterparts), and higher energy prices," the analysts note. Meanwhile, in Latin America, Mexico could fall into recession as result of lower U.S. demand for imported goods, DRI-WEFA suggests. "For the rest of the region, the looming devaluation and/or default in Argentina pose the biggest threat," the analysts say. "Argentina itself is suffering through the third year of declining out, and is unlikely to see a recovery this year or even next."